On January 3, 2024, the United States Court of Appeals for the Tenth Circuit reversed a district court decision that held that a Colorado gold mining company’s operation of four settling ponds constituted an unpermitted discharge of pollutants into navigable waters under the Clean Water Act (“CWA”).  In Stone v. High Mountain Mining Company, No. 22-1340 (10th Cir. 2024), the Tenth Circuit held that the district court did not correctly follow the Supreme Court’s decision in County of Maui v. Hawaii, 140 S. Ct. 1462 (2020) regarding the CWA’s applicability to indirect discharges to navigable waters.

High Mountain Mining Company (“High Mountain”) owns and operates a gold mine near Alma, Colorado, within the South Platte River floodplain.  High Mountain hauls excavated material to a processing plant where it is washed with river water to recover gold.  The wastewater is then discharged to four unlined settling ponds.

Plaintiffs filed a citizen suit under CWA, 33 USC §§ 1331(a) and 1365(a), alleging, among other things, that High Mountain’s operations were discharging pollutants from the four settling ponds into groundwater, which then migrated to the Middle Fork of the South Platte River.  Plaintiffs contended that High Mountain was therefore operating without a National Pollutant Discharge Elimination System (“NPDES”) permit in violation of the CWA.  The lawsuit sought a $1 million penalty and permanent injunction against High Mountain.

In September 2022, the district court found that the settling ponds were point sources discharging pollutants into the Middle Fork by way of groundwater, and therefore, High Mountain violated the CWA because it did not have a NPDES permit for these discharges.  The district court ordered High Mountain to pay $500,000 in fines for the CWA violations, though declined to issue any injunctive relief.

On appeal, the Tenth Circuit reversed the district court’s decision and remanded the case back to the district court for further proceedings because the district court had not adequately considered the factors in the Maui decision.  Specifically, in Maui, the Supreme Court held that a NPDES permit is required for a discharge to groundwater when it is the “functional equivalent of a direct discharge” from the point source to the navigable waters.  To determine whether a discharge to groundwater is the functional equivalent of a direct discharge to a stream or river, the Supreme Court established a list of seven non-exclusive factors to consider (at 1476-77):  (1) transit time; (2) distance traveled; (3) the nature of the material through which the pollutant travels; (4) the extent to which the pollutant is diluted or chemically changed as it travels; (5) the amount of pollutant entering the navigable waters relative to the amount of the pollutant that leaves the point source; (6) the manner by or area in which the pollutant enters the navigable waters; and (7) the degree to which the pollution (at that point) has maintained its specific identity.

In this case, while the Tenth Circuit agreed with the plaintiffs that the first two factors, time and distance, generally weighed in favor of a functional equivalent finding, the court held that the district court did not adequately consider the evidence relating to the other Maui factors.  Rather, certain factors were given no weight, including the extent to which the pollutant is diluted or chemically changed as it travels and the amount of pollutant entering the navigable waters relative to the amount of pollutant leaving the point source.  The Tenth Circuit explained that, “[r]ather than holding Plaintiffs accountable for failing to put on evidence of all the geology that would establish the functional equivalent of a direct discharge to the Middle Fork, the [district] court effectively shifted the burden to High Mountain to prove the Settling Ponds were not the functional equivalent of a direct discharge,” which was inconsistent with Maui.  By failing to consider all of the Maui factors and shifting the burden of proof to the defendant in this fashion, the district court’s decision threatened to undermine state regulation of groundwater, the Tenth Circuit explained. 

Notably, in November 2023, the US EPA released draft guidance describing how EPA intended to implement the Court’s  Maui decision and the “functional equivalent” standard.  Public comments on the draft guidance were due on December 27, 2023.  EPA has not indicated when it will release a final guidance document.

In any event, the Stone v. High Mountain decision confirms that the functional equivalent test requires a comprehensive and rigorous application of the Maui factors – the relevance and weight of which are dependent on site-specific considerations.  The EPA’s upcoming guidance and additional court decisions may offer further clarity on the application of the factors in various scenarios as well.

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